Tuesday, June 21, 2011

Evan McKenzie, a political science professor at the University of Illinois at Chicago, argues in a new book that homeowners associations inherently infringe on people's rights, and that their time is limited. ----------------What a killjoy this McKenzie guy is.

8 comments:

I am not holding my breath...In the great State of Massachusetts, we have just put our 3rd speaker of the house in jail...this is the most powerful position in the legislature.The Committee on Housing is squarely in the pocket of the association lawyer/lobby...(read:they pay them money)...This HOA/Condo system is not going anywhere anytime soon here.In the meantime, blog about the disgracefull behavior of your HOA/Condo...Sunlight is the best disinfectant.Read about how my HOA, the Falmouth Airpark HOA ripped off my 92 year old neighbor:http://falmouthairparkhoa.blogspot.com/

Like Mike, I'm not holding my breath either. As that killjoy McKenzie has pointed out in the past, the institution is firmly entrenched and backed by powerful special interests with lots of money. Based on my own personal observations, the HOA lobby has managed to fool a lot of people into thinking they are necessary bastions of free choice.

When an HOA corporation can steal the house of U.S. Army captain while he's deployed to a combat zone, and every single "I support the troops" pundit completely ignores the story, don't expect sympathy for all of the other nameless victims of John Carona's (Republican-Dallas) house-stealing business empire. Shame on you Bill O'Reilly, Sean Hannity, Glenn Beck, Glenn Reynolds, Ann Coulter, Michelle Malkin, Rush Limbaugh, Mike Rosen, John Stossel, etc., for channeling the spirit of Walter Duranty.

When 1/2 of homeowners describe their HOA as "a major headache," 1/5 have been in what they describe as a "war with their HOA", and 4/5 would "consider not buying a home" governed by an HOA (L.A. Times, 2007. Service Magic, 2007, see also here), the Free Market Fairy has obviously failed to serve the interests of consumers.

For single-family housing, HOAs are not only counter-productive, they are completely unnecessary.

The "amenities" (swimming pool, golf courses, security gates) should be self-supporting businesses based on user fees, not perpetual lien rights and the threat of foreclosure by the HOA corporation. If they can't survive that way, then they shouldn't be in business.

The infrastructure (streets, sewage, parks) would have to be turned over to the municipality or county. This is not a radical notion, since this is the way things were recently done before the rise of the HOA industry. Will this mean higher taxes? Yes, but to some degree it would be off-set by elimination of HOA dues. Whether that offset is more, equal, or less is beyond my ability to determine here.

Without HOAs, homeowners would still be able to sue each other for violations of deed restrictions and covenants. However, without the perverse incentives and moral hazards of using other people's money against them, there would be far fewer lawsuits. Nobody is going to go through the time and expense of litigating against their neighbors unless it's pretty darn important (eg, no more lawsuits for having a garage door open). This is exactly the situation that HOA lawyers, who profit from creating strife and conflict within "common interest" communisties, want to avoid:

"Owners can sue each other directly to enforce the rules but most would rather not do that. It’s messy and expensive and personal. Instead the corporation does it. But that doesn’t change the essential character of the dispute; it just makes it less intimate. Associations, like governments, provide the anonymity and security that prevent street brawls."

Notice the author's cheap rhetorical trick of trying to convince the reader that without HOAs there would be "street brawls."

The issues surrounding condominium ownership are more complex, because there is a real shared infrastructure that cannot simply be turned over to the municipality or county.

However, it is worth pointing out that

Before 1960, the condominium form of ownership was unknown in the United States. Beginning in the early 1960s, the states began enacting statues authorizing the condominium form of ownership, principally in response to the enactment of the Na- tional Housing Act of 1961, which extended Federal Housing Administration mortgage insurance to the condominium form of ownership. See McKenzie, supra note 2, at 95. By 1967, all fifty states had enacted condominium statutes. Id. at 95–96.

Prohibiting new condo development might be a good step to prevent the problem from getting worse. As Siegal notes, there was no common-law basis for condominium ownership before statutes authorized them.

As for existing condominiums, perhaps concerting them to the co-op model, where owners have a share of one mortgage, would be better. Or follow Tyler Berding's suggestion and turn the owners into renters.

As Mr. Berding has pointed out, and I think that many others here would agree with him, the current model of condominium ownership is simply not sustainable and not workable in the long term. Hence the term "Tyler Berding's death spiral."

It is worth pointing out that, in my opinion, one of the problems with single-family HOAs is that they apply a condominium structure of governance where it is not needed. While this is profitable for the HOA vendors, it is a detriment to the property rights and financial security of the individual homeowners, since it puts their homes at risk for whatever debts and liabilities the HOA corporation creates.

The question then becomes, how to eliminate HOAs? This $50 billion per year industry, which controls 20% of the housing market, has done an effective job of buying state legislatures. So an outright prohibition is unlikely to succeed.

The answer is to take a page out of the conservative/libertarian playbook, in their efforts to weaken labor unions.

A group of conservative U.S. senators has introduced a bill to restrict unions from forcing workers to join and pay dues as a condition of employment. The move on Capitol Hill comes as several states consider what's known as "right-to-work" legislation.…GOP senators in Washington said national legislation is needed to stop the "strong-arm political tactics" they claim labor bosses are using to compel new employees into joining their ranks. They introduced the National Right to Work Act Tuesday. "No American should be forced to join a union and pay dues to get a job in this country," Sen. Jim DeMint, R-S.C., said in a statement. "Many Americans are already struggling just to put food on the table, and they shouldn't have to fear losing their jobs or face discrimination if they don't want to join a union. Forced-unionism shields unions from member accountability and has a detrimental effect on the economy."

Prohibiting mandatory membership in a labor union as a condition of employment has been a plank in the Republican Party platform for as long as I can remember.

So what would be different about prohibiting membership in an HOA union as a condition of home ownership?

Unlike the private contracts between employees, labor unions, and employers, the contract between a homeowner and an HOA union is… oh wait.

Imagine if the above story read something like

A group of conservative U.S. senators has introduced a bill to restrict HOA unions from forcing homeowners to join and pay dues as a condition of home ownership. The move on Capitol Hill comes as several states consider what's known as "right-to-home-ownership" legislation.…GOP senators in Washington said national legislation is needed to stop the "strong-arm political tactics" they claim HOA bosses are using to compel home owners into joining their ranks. They introduced the National Right to Home Ownership Act on Tuesday. "No American should be forced to join an HOA union and pay dues to get a home in this country," Sen. Jim DeMint, R-S.C., said in a statement. "Many Americans are already struggling just to put food on the table, and they shouldn't have to fear losing their homes or face discrimination if they don't want to join an HOA union. Forced-HOA membership shields HOA unions from member accountability and has a detrimental effect on the economy and housing market."

If there are HOAs that truly provide a valuable service that homeowners are willing to pay for, then those HOAs will survive.

There will always be the "free rider" problem, but the same is true of the services provided by labor unions. If enough members -- either of HOAs or labor unions -- aren't willing to pay, then the HOA/labor union won't survive.

Of course, there will be some principled libertarian opponents of individual private property rights, such as the Independence Institute, Colorado's "Free Market Think Tank".

Government has no right to legislate how you interact with your employers…Unlike a government, labor unions cannot extend their jurisdiction to employees who have not opted in. Since labor unions are very local and small, participants are often co-workers and hence have incentive to settle disagreements in a civil manner.

Government has no right to legislate how you build on your property...Unlike a government, HOAs cannot extend their jurisdiction to homeowners who have not opted in. Since HOAs are very local and small, participants are often neighbors and hence have incentive to settle disagreements in a civil manner.

No one should be forced to pay tribute to a union to get or keep a job. We need to pass "right to work" legislation, as more than 20 other states have done. And no worker should have money taken out of her paycheck to be used for political purposes without her direct written consent. We should follow Washington state's example and pass "paycheck protection."

Al Franken made a late appearance and demonstrated, once again, why Saturday Night Live suits him better than the United States Senate. Franken got angry and said it is untrue that anyone is ever forced to join a union. He obviously never worked in the produce section at Shop ‘n Save in Pittsburgh, Pennsylvania. In a closed-shop state like Pennsylvania, the laws require employees to be members of a union if the employer is unionized. Enzi quipped, in response to Franken’s error, that you wouldn’t have to join a union unless “you wanted a job.”

could easily become

Al Franken made a late appearance and demonstrated, once again, why Saturday Night Live suits him better than the United States Senate. Franken got angry and said it is untrue that anyone is ever forced to join an HOA. he obviously hasn't tried to buy a new home. In every state, the law requires homeowners to be members of an HOA union where one exists, something that municipalities have been mandating for decades. [Republican U.S. Senator Mike] Enzi quipped, in response to Franken’s error, that you wouldn’t have to join an HOA unless “you wanted a home.”

but won't, because conservatives and libertarians and Ayn Randians are as clueless and in denial about the real-world consequences of their socio-economic theories as your typical college campus communist wearing a Che Guevara t-shirt driving around in a Prius sporting a "Hope and Change" bumper sticker.

Condominium associations are as distasteful but more difficult to eliminate than HOA corporations. The practice of re-characterizing assessments in order to create artificial delinquencies for the benefit of the management company and attorney are rendering all units in a project unmarketable since they can't get GSE loans when the delinquencies exceed 15%. When the management companies control the board, they'll run the whole project into the ground. When a non-management company controlled board realizes the implication of the management company's practices, it will be the end of the extortion racket for many of the vendors. Thank goodness the government isn't going to enable this bad behavior by financing the creation of a substitute victim.

With respect to the HOA-burdened property - it may well become a race to avoid being the last to unload.

Imagine what "Right-To-Own-A-Home" laws (see proposal above) could do for the housing market!

And since conservatives and libertarians advocate government interference in the private contracts between employees, employers, and labor unions, there is no reason they can't support applying those same government regulations to the so-called "contract" between homeowners and HOA unions.

About Me

I am a professor of political science at the University of Illinois at Chicago, and an adjunct professor at The John Marshall Law School in Chicago. Nothing contained in this blog represents the opinions of UIC or John Marshall, and nothing you see here is legal advice. You can reach me at ecmlaw@gmail.com